Bombardier Stock Breaks Out, Anticipating Much Higher Prices

Bombardier Stock
credits:istock.com/bluebay2014

Bombardier Stock: A New Bull Market Has Begun

Equities as an asset class are getting quite the hype and attention at the moment because the stock market continues to perform on a scale I seldom see. Higher prices are the order of the day, and the path of least resistance clearly leads to higher prices. A bull market is bucking in full force, and these are exciting times indeed.

This is why it brings me great pleasure to focus on Bombardier Inc (OTCMKTS: BDRBF), (TSE: BBD.B) stock. Based on the BBD.B stock chart, I have reason to believe that the bear market that has caused so much anguish for investors has finally been put to rest, and that a new bull market has taken its place.

This moment of truth that I have been looking for has finally arrived, and the catalyst was a news event. On January 26, the U.S. International Trade Commission ruled unanimously in favor of Bombardier in a trade dispute brought forward by Boeing Co (NYSE: BA).

After this news broke, Bombardier stock surged by 15.31%. This exceptional move toward higher BBD.B stock prices did a number on the company’s stock chart, changing it on a significant level forever.

The following stock chart illustrates the impact that the surge in price has had.

Chart courtesy of StockCharts.com

This BBD.B stock chart illustrates a bearish trend containing the quintessential characteristic that defines all bearish trends, which is a sequence containing a series of lower stock price highs and lower stock price lows.

This bearish trend has been in development since 2000, which marked the peak of the dotcom bubble. This means that this bear market has been 17 years in development

The anguish experienced by investors can be quantified by outlining that, in 2000, the BBD.B stock price peaked at $21.85 and it didn’t find its footing until 2016, when the share bottomed at $0.72. This represents a 96.7% drop from peak to trough, essentially a complete loss.

The downtrend line is what I used to define this bear market, and it was created by connecting the sequence of lower stock price highs. This downtrend line, which acts as level of price resistance, thwarted all attempts to move beyond it.

I mentioned in a November 8, 2017 publication titled “Bombardier Stock Is Inches Away from Concluding Its Bear Market” that this downtrend line is what  separates BBD.B stock from a true bull market. This statement could not have been more true because, for the next few months, the stock price traded in a range just below the downtrend line.

It was not until the fateful day on January 26, 2018, that a bullish news event acted as a catalyst to finally send the share prices surging above the downtrend line. The breakout above the line suggests that the bear market that spanned 17 years has finally concluded and that a new bull market has begun.

This breakout does not come as a surprise, because I was anticipating such an outcome because a completed technical price pattern was already suggesting that higher prices were on the horizon.

This technical price pattern is highlighted on the following Bombardier stock chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the stock chart is a cup and handle. This pattern develops because a significant level of  price resistance, which resided at $2.70, prevented the stock price from advancing.

In the process of establishing this level of resistance and testing it from below, two distinct troughs were formed. The first trough is much larger than the second, and these troughs are what create and characterize the cup and handle price pattern.

On October 17, 2017, This cup and handle price pattern was completed when Bombardier stock gapped higher, following the news that they had formed a joint venture with Airbus. This completed price pattern suggested that higher Bombardier stock prices were on the horizon.

Aside from just suggesting that higher stock prices were on the horizon, this price pattern implied that $3.80 was a viable price objective. This objective was obtained by taking the depth of the cup and extrapolating that value above the significant level of resistance that defined the pattern.

This objective implied that the downtrend was set to be broken, which means it was only a matter of time before a new bull market was in development.

Analyst Take:

On January 26, on the heels of a bullish news event, Bombardier stock surged higher in price, breaking a longstanding trend line that defined the bear market in BBD.B stock. This event suggests that a new bull market is now in development and that, therefore, higher stock prices can be expected.